Mystery of the 'jobless recovery'

As Americans celebrate Labor Day, they face a historically weak labor market and meager rise in paychecks.

If Labor Day is the time to celebrate the American worker, someone forgot to tell the American worker.

The economy is in the throes of one of the most baffling "jobless recoveries" since the union movement created the first Labor Day more than 120 years ago in New York City.

Consider these facts: Employment growth at the moment is the lowest for any recovery since the government started keeping such statistics in 1939. The labor force shrank in July as discouraged workers stopped seeking employment. The number of people employed has fallen by more than 1 million since the "recovery" began in the fall of 2001. The upshot: Better throw a ballpark frank on the barbecue this weekend instead of a T-bone.

True, the economy is showing signs of improving. The government reported Thursday that the economy grew at a 3.1 percent annual rate in the second quarter - better than many expected. Consumer and business spending, in particular, was robust. Many retailers are experiencing strong back-to-school sales, too, as kids buy the latest SpongeBob shirt to go along with their intent to conquer Ulysses.

Yet the recovery is probably not vigorous enough yet to reduce unemployment much this year, or even well into 2004 from the jobless rate of 6.2 percent in July, economists figure.

The "jobless recovery" has clearly hit some groups harder than others. Unemployment among African-Americans, for instance, has risen 1.3 points during this recovery, versus a 0.6 percent rise for Americans in general.

College graduates are finding it tougher to find jobs than at any time in 20 years, notes Jared Bernstein, an economist at the the Economic Policy Institute (EPI) in Washington.

"The loss of manufacturing jobs makes it difficult to attract young people to industry," complains Jerry Jasinowski, president of the National Association of Manufacturers, in a Labor Day statement.

Shrinking paychecks

Nor are paychecks growing much. Between the first quarter of booming 1998 and the end of a brief nine-month recession in the fourth quarter of 2001, those who are working enjoyed real increases in their median wages of 2 percent a year.

But since the recovery began 20 months ago, after-inflation wages have actually stalled. In fact, men have seen a small decline in real wages; women have experienced a small gain, finds an EPI analysis.

Yet surveys of larger companies show that businesses intend to continue giving merit pay increases - about 4 percent this year in current dollars, a little less in 2004, notes a survey of 491 companies by ORC Worldwide, a New York consulting firm.

One reason for the meager increase in paychecks, besides the economy, may be the decline of unions. Organized labor has been hit by the falloff in manufacturing and other industrial jobs, especially in such heavily unionized industries as steel, automobiles, and the airlines. Their power has shrunk.

In 1995, 14.9 percent of payrolled workers were union members; in 2002 it was 13.2 percent. That percentage amounts to 16.1 million unionized workers, 13 million of them in unions affiliated to the AFL-CIO.

"They are getting nailed left and right," says Dean Baker, an economist at the Center for Economic and Policy Research in Washington.

Many degrees of separation

In Washington, unions face what most perceive as a hostile Bush administration. President Bush and AFL-CIO President John Sweeney have not yet met in person. Mr. Bush has not invited the labor federation leader to the White House.

Nor has he accepted AFL-CIO invitations to its meetings, including an Executive Council session in Chicago last month.

Probably no other president has so snubbed the AFL-CIO in recent decades, a source notes. At a press conference Thursday, Sweeney called the failure of Mr. Bush to meet with the AFL-CIO a "travesty." Earlier Republican presidents did get together with the head of the AFL-CIO.

Unions try new tactics

Unions are trying new techniques to increase their bargaining power. In the case of protracted negotiations currently under way between Verizon, the nation's largest telecom company, and the Communications Workers of America and the Electrical Workers, union members are threatening to switch their own local and long distance service to AT&T, another unionized carrier, if they don't get a satisfactory contract.

They have support from the 750,000-member American Federation of State, County, and Municipal Employees union.

But Verizon, so far, doesn't seem intimidated. Business generally finds it easier to resist labor demands and unionization when jobs are scarce.

Unions are trying other unconventional tactics as well. Mr. Sweeney, for instance, announced Thursday that the AFL-CIO was starting a new organization of nonunion employees. Called Working America, its aim is to change the "direction of this country" by educating workers about such things as healthcare, corporate governance, and trade. But he offered few details on financing or other aspects.

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